Gold levels off as greenback gains

Gold steadied yesterday, surrendering earlier gains, as the dollar rose against a currency basket, but prices were underpinned by concerns over a potential US debt default as lawmakers in Washington argued over deficit-cutting measures. Interest in the precious metal was muted as investors took a breather after pushing gold prices to record highs in two of this week's three previous sessions. Spot gold was up 0.1 per cent at $1,614.80 an ounce at 1105 GMT. It hit a record $1,628 an ounce on Wednesday, before correcting sharply later in the day. "While we wait for news from Capitol Hill it seems like gold is dancing a bit to the ups and downs of the dollar," said Ole Hansen, senior manager at Saxo Bank. "There are still enough uncertainties out there for the market to focus on gold, the Swiss franc and the Japanese yen for security," he added. Article continues below A bill to cut the US deficit faces a nail-bitingly close vote in Congress yesterday as the top Republican lawmaker, House of Representatives Speaker John Boehner, sought to quell an internal revolt and push his plan forward. An agreement to cut the deficit is needed before lawmakers will agree to raise the US debt ceiling. If it does not do so, the world's largest economy will run out of money to pay its bills in less than a week. The dollar recovered early losses to rise 0.1 per cent against a basket of six major currencies as Washington showed no signs of progress on the agreement. Euro falls The euro fell, Italian government bond yields rose and Bund futures hit a session high as edgy markets turned to safe-haven assets after an Italian debt auction and on unconfirmed rumours about the resignation of the country's finance minister. US gold futures for August delivery were up 20 cents an ounce at $1,615.30. "As we draw closer to the Treasury's August 2 deadline for raising the debt ceiling, there's a rising likelihood of a rushed, short-term fix that essentially kicks the problem further into the future," said UBS in a note. "This is likely to prompt the market to price in a higher risk of a credit ratings downgrade. The spread between 10-year German bunds and U.S. 10-year [Treasuries] widened the most in over five months yesterday." Miners' strike On the supply side of the market, tens of thousands of South African gold miners will stop work on Thursday, adding to a wave of strikes and potentially costing the gold mining sector $25 million (Dh91.81 million) a day in lost output. The impact of supply outages — particularly short-term ones — on gold is usually fairly soft, given the availability of above-ground stocks of the metal relative to other commodities.